Q4 2020 Silk Road Medical Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the Silk Road Medical's Vantage fancy fourth quarter earnings call. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.
Ask a question during the session you will need to press star one on your telephone.
Please be advised that today's conference call is being recorded and if you require any further assistance. Please press star zero.
I would now like to hand, the conference over to your Speaker today, Ms. Caroline Paul of Investor Relations. Thank you. Please go ahead for them.
Thank you and thank you all for participating in today's call.
Joining me are Erica Rogers, Chief Executive Officer, and Lucas Buchanan, Chief Financial Officer, and Chief operating Officer.
Earlier today Silk Road medical released financial results for the full year ended December 31 2021.
Copy of the press release is available on the company's website.
Before we begin I'd like to remind you that management will make statements. During this call that include forward looking statements within the meaning of federal Securities laws, which are made pursuant to the safe Harbor provision for the private Securities Litigation Reform Act of 1995.
Any such statements any statements contained in this call that relate to expectations or predictions of future events results or performance are forward looking statements.
All forward looking statements, including without limitation those relating to our operating trends and future for future financial performance the impact of COVID-19 on our business and prospects for recovery.
Spence management expectations for hiring physician training and adoption growth in our organization and reimbursement market opportunity commercial and international expansion label expansion.
And product and pipeline development are based upon our current estimates and various assumptions.
These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward looking statements.
Accordingly, you should not place undue reliance on these statements.
For a list and description of the risks and uncertainties associated with our business. Please refer to the risk factors section of our quarterly report on form 10-Q filed with the Securities and Exchange Commission on November 16th 2020.
This conference call contains time sensitive information and is accurate only as of the live broadcast today March for 2021.
Road medical disclaims any intention or obligation, except as required by law to update or revise any financial projections or forward looking statements, whether because of new information future events or otherwise.
And with that I will turn the call over to Erica.
Thanks, Caroline good afternoon, and thank you for joining our fourth quarter year end and year end 2020 earnings call. Joining me is Lucas Buchanan, our Chief Financial Officer, and Chief operating Officer.
While 2020 was marked by unprecedented challenges, we would prefer to reflect on the strength and tenacity of our team here at Silk Road medical and the accomplishments that have paved the way for growth in 'twenty 'twenty, one and beyond.
Throughout the year, we continued our momentum in the United States, expanding our sales team training, new physicians in innovative ways and meaningfully moving physicians up their adoption curve.
These efforts were reinforced by tremendous strides in published clinical evidence with over 7000 T car procedures worth of data in peer reviewed publications.
Exiting 'twenty 'twenty physicians performed more than 26500 T car procedures worldwide with over 10000 in 'twenty 'twenty alone.
We also made meaningful progress on multiple long term growth and market expanding initiatives.
As part of these endeavors, we recently submitted our PMA supplement for the on route Trans carotid stent system intended to expand indications for use to include the treatment of patients at standard risk for adverse events from carotid endarterectomy and other words standard surgical risk.
Coming into this year, we are well positioned with a solid commercial clinical and financial foundation to focus on the opportunities within our 5 billion dollar addressable market.
Turning now to our Q4 results as we indicated in January we entered the fourth quarter of 2020 aware of the potential for a resurgence in the pandemic and that came to bear in the latter part of the quarter.
With hospital resources pressured specifically staff labor and ICU beds.
We started to see constraints on elective procedures that said for patients with severe carotid artery disease stroke prevention can only be delayed so long all in this translated into solid fourth quarter results in spite of the worsening environment.
2020 revenues were $75 million up 19% year over year with fourth quarter results of 21 million and year over year growth of 13%.
Through the year, we expanded our active sales territories from 33 to 40 by year end and began the first quarter of 2021 with 43 territories.
Despite the significant dip in physician training efforts in the second quarter, we were able to train over 350, new physicians in 'twenty 'twenty to reach approximately 1800 total physicians trained.
We also expanded our hospital account base from roughly 640 in the beginning of the year to just over 800 by year end.
As a result of our commercial efforts our growing physician base performed just shy of 2900 procedures in the fourth quarter and over 10000 T car procedures for the full year.
Over the course of 'twenty 'twenty, one we expect to see continued momentum as the health care operating environment normalizes.
The key factors governing a return to normal growth or of course hospital resources and patient behavior.
These are in turn impacted by the pace of virus transmission the impact of variance and vaccination efforts.
We're cautiously optimistic that normalization will begin in the second quarter, although there are clearly several unknowns.
With these caveats in mind, our expectation is for 'twenty, one 'twenty, one revenues to be in the range of $102 million to $108 million.
As we all share in the Trans carotid era, we continue to be focused on U S commercial execution with an increasing bias towards driving deeper adoption within our trained physician base.
As always this entails a relentless focus on patient outcomes as we seek to push T car towards the standard of care.
Over the past five years, we have meticulously built the markets only dedicated carotid commercial infrastructure.
<unk>, an enviable clinical evidence base and trained a large cohort of physicians.
We look forward to leveraging this collective infrastructure as we exit 2020, with just 6% penetration into the estimated U S treated patient population and only 2% of the annual diagnosed population.
As such our top two strategic priorities for 2021 are number one continued focus on U S commercial execution and driving the adoption curve and number two preparation for a potential standard surgical risk label expansion for the on road stent.
At the same time, we are also investing in our long term growth drivers, which encompass new indications new products, new therapies, including acute ischemic stroke and international expansion.
With respect to our first priority.
2021 marks the third year in a row with U S commercial execution as our number one priority and this is unlikely to change for years to come.
We have proven that we can compete and win where so many others have failed in the past against what is now an almost 70 year old standard of care and carotid endarterectomy in fact in a study just published in Jama network open. The authors found the availability of T car and a half.
Spittle is associated with a significant decrease and the likelihood of major adverse cardiovascular events at 30 days after carotid revascularization.
Whether T car or carotid endarterectomy.
In other words, having a less invasive basic option like T car allows for better patient care.
Regarding our opportunity to continue moving physicians up the adoption curve.
Over half of the physicians we've trained through 2020 were trained within the prior eight quarters.
As of the fourth quarter of 2020.
When we normalize time from training and we look at our top quartile. We are moving physicians from about one point for procedures per quarter up to five point too.
We are encouraged by the meaningful progress we've made over a short period of time in the future is very bright as we look to leverage the foundation we have built.
We remain the only T car company in the market as we execute towards this blue Ocean multibillion dollar opportunity.
With respect to our second priority.
We've been focused on Architected, a regulatory strategy around the standard surgical risk patient population and ensuring we meet the needs of key stakeholders.
While there is still plenty of opportunity within the high surgical risk market. We have previously discussed our desire to unlock the remaining one third of the currently treated U S patient population.
After careful consideration with key constituents. We are pleased to have recently submitted our PMA supplement for the on route stent intended to expand our indications for use to the standard surgical risk patient population.
This is an important first step on our journey to address the full patient population with severe carotid artery disease.
From physician training to commercialization efforts to a likely post market study if the PMA supplement is approved we will be prepared to enter an era, where T car is on an even playing field with carotid endarterectomy in terms of an addressable patient population.
With our two top priorities in mind, we enter 2021 with a desire to further accelerate investment in our commercial organization.
Going forward, we expect to shift more of our hiring emphasis towards a new sales professionals our area managers, who will continue to leverage our strong base of therapy development specialists in a few moments Lucas will share more details on our commercial strategies designed to best serve the ongoing interest in CCAR.
Turning now to our other long term growth drivers.
With respect to with respect to markets outside the U S. We recently highlighted a conservative international market opportunity of $2 3 billion.
Which together with the $2 8 billion dollar U S market derives a global opportunity of over $5 billion.
To put that in perspective, the U S is only 10% of the global stroke burden.
International expansion remains on the horizon as we make regulatory progress in geographies, such as China, and Japan, and as we evaluate go to market strategies.
We are excited about the opportunity to bring T car to other corners of the globe, where there is both awareness and demand in the physician community.
Regarding further development of our pipeline, we remain committed to expanding our proprietary trans carotid technologies, most notably to address the neurovascular market segment, where we see opportunity for improved clinical outcomes.
We are pleased with the progress we are making in acute ischemic stroke and other areas and we look forward to sharing more details in the future.
Finally, we would like to provide a brief update on our voluntary recall of certain lots of her on route Trans carotid stent systems, which are manufactured by our partner Cordis.
As we discussed previously our team reacted swiftly to mitigate risk by recalling the impacted units and launching a comprehensive investigation and testing effort to identify the root cause.
At this point there have been no reported strokes deaths or long term patient sequela associated with these units and we have not received any new complaints related to this issue cordis is ramping up its production to replenish our inventories.
So in summary, we remain focused and excited about our potential to drive the U S. T car market forward as the sole player while we continue to progress our other long term growth initiatives.
With that I will now turn the call over to Lucas Buchanan, our Chief Financial Officer, and Chief operating Officer.
Thank you Erica revenue for the three months ended December 31, 2020 was $21 1 million a 13% increase for.
From $18 6 million in the same period of the prior year.
Growth was again driven by increased adoption of <unk> across an expanding base of hospital accounts trained physicians and active sales territories, partially offset by regional headwinds related to COVID-19.
Gross margin for the fourth quarter of 2020 was 75% roughly flat compared to the fourth quarter of the prior year as improvements in productivity were slightly offset by the timing of investments for manufacturing engineering and infrastructure projects.
Total operating expenses for the fourth quarter of 2020 were $39 million, a 44% increase from $21 4 million in the fourth quarter of 2019.
R&D expenses for the fourth quarter of 2020.
For $10.0 million compared to $3 3 million in the fourth quarter of 2019.
The increase was primarily driven by the timing of research and development initiatives.
Sales general and administrative expenses for the fourth quarter of 2020 were $29 million compared to $18 2 million in the fourth quarter of 2019.
The increase was primarily attributable to expenses related to growth in our commercial team as.
As well as personnel related expenses.
Expense growth was partially offset by the continued reduction in travel trade show and other expenses due to COVID-19.
We expect continued growth in operating expenses in 2021, as we expand our commercial team and invest in a number of continued new R&D initiatives.
Net loss for the fourth quarter was $16 $8 million for a loss of <unk> 49 per share as.
As compared to a net loss of $8 3 million for a loss of 27 per share for the same period of the prior year.
We ended 2020 with 147 $5 million of cash cash equivalents and short term investments.
Regarding the balance sheet impact of the voluntary recall of certain lots of our on road trends for audit stent systems in the first quarter of 2021.
The obligation to customers was recorded as an accrued liability, whereas the replacement product from quarters.
Considered a receivable.
Turning to our commercial strategy that Eric had mentioned earlier and our outlook for 2021, we are focused on accelerating the adoption curve and are now significant trained physician base as well as being prepared for a potential standard surgical risk indication.
With this in mind over roughly the next two years, we expect to adjust our historical one to two ratio a very managers to therapy development specialists.
To almost a one to one coverage ratio without significant change to our overall goals for commercial team size.
In other words, we will be investing in more sales expertise with more focused territories.
Implement our excellent clinical support.
We expect to end 2021 with over 50 active sales territories.
We are committed to growing our footprint with further territory expansion in 2022.
While driving adoption in our trained physician base is our primary focus we also expect to train approximately 200, new physicians in 2021.
We expect our physician base to perform in excess of 14500 procedures for the year.
As a result of our commercial efforts, we expect full year revenue to be in the range of 100 into $108 million representing growth of 36% to 44% over 2020 revenue of $75 2 million.
We are cautiously optimistic with our expectations recognizing that trends with COVID-19, which are persisting in the first quarter can alter the timeline to a normalized healthcare operating environment.
One final update that I wanted to provide is on a rebranded website debt also includes our environmental social and governance policies.
Our inaugural corporate sustainability report, which we report, which we published in the fourth quarter.
Lights, our dedication to patient safety as well as our commitment to diversity and equal opportunity.
Fundamentally we are in this business to transform and improve lives.
We are looking forward to further progress on our status as a socially responsible organization.
At this point I would like to turn the call back to Erica for closing comments.
Thank you Lucas.
As we reflect on 2020 in the current environment. We are reminded about how far we have come as a company over a relatively short period of time.
Just a few years ago, there was no such thing as T car and now we stand well in excess of 25000 procedures performed to date.
We have developed an entirely new market and in so doing we have ushered in an entirely new era of trans carotid therapies.
With a tumultuous, but rewarding 'twenty 'twenty behind us I look forward to building upon silk road's incredible base of employees engineering competencies and deep intellectual property portfolio supporting Trans carotid innovations.
This solid foundation positions us well to continue transforming the way we treat patients in order to deliver more value to patients the health care system and of course, our shareholders.
With that we will now open it up to questions.
Operator.
Ladies and gentlemen, we will open it up for a question and answer session. If you wish to ask a question. Please press star one on your telephone if you wish you canceled your request you May press day found their hashed E. Please standby, while we compile the Q&A last day.
Your first question comes from the lineup Bob Hopkins from Bank of America. Your line is now open.
Oh, great. Thanks for taking the question and good afternoon.
Hi, Bob.
Erica how are you.
Good.
So Chris I wanted to ask you guys about the PMA that you mentioned in the press release and I'm. Just curious could you give us a sense for what what data might be included in that filing and whether or not the big uptick in R&D in the fourth quarter as related to that filing and data collection.
You.
Yeah sure Bob. Thank you for the question and yes, we're really pleased to have announced the submission of the PMA supplement for standard risk.
And I think it's obvious that we did not do a prospective clinical trial.
Specifically for this indication.
But with that we're really not going to talk about the content of the submission itself.
We feel it's not prudent to talk about at this point.
In the review process by the FDA and relative to the R&D expense I'll, let Lucas take that question.
Yes, I mean, ultimately we hope to shed some light on the front part of your question in terms of.
The uptick.
And in R&D in Q4.
That's part of it there are other puts and takes related to the.
For the timing of R&D broadly defined including clinical regulatory and quality.
Alright.
For that the two of the things I just wanted to get a quick a quick comment on are you you mentioned O U S markets and I know you know reimbursement in Europe is something that debt.
Obviously, a pathway associated with that so I'm just curious on an O U S is there any kind of preliminary sense you can give for.
When you think you'll be <unk>.
Commercial outside the United States and then it also Eric if you don't mind just.
Here, we are a march 1st.
Things sounded pretty pretty weak in December and January.
Have you seen have you seen things trough in terms of surgical procedure volumes and start to get better yet just a directional sense would be great.
Sure let me take those in reverse order Bob So so here's what's interesting is.
Our mix of asymptomatic and symptomatic treatment right procedures is kind of an interesting barometer. It's an interesting lens to look through for kind of hospital based procedures and its turned out to be.
Relatively accurate barometer throughout.
Throughout the pandemic interestingly watching that mix of asymptomatic and symptomatic.
Change and so while we saw in January as you can expect coming out of the fourth quarter.
Our mix, where the symptomatic urgent patient population was being treated quite aggressively.
Please that as we've moved through the quarter, we're starting to see what we would consider our more normal mix of asymptomatic and symptomatic so I think that.
That's a reassuring sign in the health care infrastructure, just in general to address that on the first part of your question on International you know for the first time, Bob we've kind of put a number, albeit a conservative number on international which we've done a roll up.
Kind of bottoms up across the major markets in which we might consider launching T car and that roll up is about $2 3 billion in the treated patient population alone.
Of course, we look at Europe, Japan and China.
And the first step for us really is to knock down the regulatory barriers in China, and Japan, which we continue to work on and we're pleased with the progress.
While we have hired a vice president of International market development, who is working closely with Andy Davis, Chief Commercial officer.
To develop the strategies to go forward in.
Some of these markets.
Oh, Okay any sense on timeline so.
We're not giving any timeline update specifically yet Bob okay. Okay, great. Thank you.
Thank you.
Your next question comes from the line of Robbie Marcus from Jpmorgan. Your line is now open.
Great. Thanks for taking my questions.
Maybe to follow up on some of those.
For the debt.
Tendered risk submission.
Was that.
At the best of the FDA did you have discussions with them, maybe you could help us understand what changed from let's say JP Morgan or the third quarter earnings call to today that that prompted it.
<unk>.
And you mentioned it would likely require a post approval study.
What what should we be expecting in terms of size and cost for something like that.
Sure well, let me, let me sort of take those in reverse order, which is that typically a carotid stent PMA would have a kind of a requisite post approval study and what we saw in our first PMA approval of the on road stent in high surgical risk Ravi what.
Does a requirement to do a what looks like a more real world study in the post market environment and of course that was roadster two roadster two with those incredible.
Results in over 600 patients and so it wouldn't be unusual for the FDA to require a post approval study for any carotid stent and so we're kind of preparing for that eventuality, we haven't disclosed any of the specifics on what we might think would be the scope or the call.
Cost and part of that is done in conversation with F. D. A as you probably know.
Kind of mid review and so we're we're not ready to reveal the details yet.
In terms of what you know what changed between JP Morgan and now really really is the submission itself and while we're not getting specific on exactly when that PMA went in.
Suffice to say it was after J P. Morgan, which is why we continue to say we were working on and in discussions with FDA and the other key constituents our strategy all along from the beginning from the Dawn of time Robbie was to be in conversations with FDA with CMS.
With the society of vascular surgery and to settle on not only the best approach from a regulatory standpoint, but also to drive adoption and to drive toward a reasonable coverage environment and so I think without getting into the details since we're in the review process now.
Suffice to say that that we reached what we felt was a reasonable agreement among the parties.
Okay, and I'm guessing, we're not going to learn more about what the agreement is until.
Approval.
Yeah, I think that that's a fair a fair assumption Ravi I think it's it.
It would be atypical for any company to kind of reveal the contents of a PMA in advance of approval and so I think those those details certainly will.
Coming to the public light on their own.
Post approval.
Got it just a few more one on.
Reimbursement upon hopeful approval do you think you would be able to get reimbursement for standard risk right away or do you think it would be a process.
They require time after approval.
Yeah, well the first step in any coverage environment as approval right. So we have to we certainly have to knock down.
For the PMA approval first but I think it's safe to say we've been in discussions all along with the with the parties around the table and so we'll continue to work toward an optimized coverage environment as.
As we seek to get FDA approval.
Got it and then last for me you train.
Around 350, or so docs during 2020 guidance for 2021 is only for 200 doctors.
You know I imagine part of this is probably due to the soft environment in first quarter, but was hoping you could you could help us.
Understand the 200 number and where that's coming from and Lucas If you want to put out our first quarter range for the street I imagine that's probably a big part of the Delta between guidance and where street numbers set just thought it'd be a good opportunity. Thanks.
Yeah, I can take the first one on on training Ravi.
We have said all along that we have been working to kind of lay down the infrastructure of territories hospitals open physicians trained at the end of the day, what we're trying to get at our procedures.
And to get at procedures, you need to train physicians and so coming out of 2020 with roughly 1800 physicians trained that's a lot of access to a lot of procedures and so as I said in my prepared remarks, our commercial focus is very much about moving those 1800 up their adoption.
Curve and this is reflected in that.
The remarks that Lucas made around the sales infrastructure really making sure that we guide and move each and every one of those physicians trained up their adoption curve and of course, the physicians trained in the pandemic environment.
You know potentially or a need some additional focus as you can imagine and so while there are more physicians yet to be trained in terms of getting at kind of the 80% of the procedural volume in the United States. Our bias is increasingly more toward moving the existing physicians up the adoption curve.
Which is why you're part of why the number is around 200 for 'twenty and 'twenty one guidance.
Yeah, and just to just to zoom out a little bit on that and then they don't.
Get to your guidance question Robbie.
At a high level, when you're going to get such an established standard of care in <unk>.
Really we've spent the last many years, establishing CCAR, which requires.
Not only opening accounts and training docs and taking them through carefully through their learning curve, but really establishing a published clinical evidence base from which to market with and so and so our past has really been about establishing key card, establishing this market and our future.
It was really we know we know the therapy works it delivers incredible outcomes and so it's more of a commercial focus and driving that adoption curve in this from this infrastructure debt.
Built.
With outcomes always is the number one goal with respect to your your guidance question.
Yes, like the rest of the industry Q1, as Covid affected as a reminder, we're impatient.
Percentage or there's there's an urgent part of the business and Theres, an elective part of the business.
Versus asymptomatic.
And our assumptions as our starting in Q2, we start to see.
A much more normalized operating environment.
So if there are.
Further COVID-19 trends at play out to the downside.
That's not necessarily in our guidance we're assuming.
More normal.
Operating environment, starting in Q2, and getting incrementally better and most of that has to do with just kind of the overall engine of medicine and getting patients.
Back into the treatment funnel back.
This funnel getting hospitals coming out of.
The funk of Covid.
And.
That's a little bit unpredictable I think we believe that vacations will be a big seasonality impact as everybody wants to go visit their families or get out of town, whether you are a patient or a provider.
We've had some weather impacts in Q1 of course.
But really.
We continue to focus on the setup for long term growth and feel feeling really bullish about the business of T card, our long term growth drivers, especially on the heels of this most recent announcement.
Of a PMA supplement submission, which is which is really amazing news.
Great. Thanks, a lot.
Your next question comes from the line of Rick Wise from Stifel. Yes.
Line is now open.
Good afternoon to you both.
Erica you were kind enough to.
Highlights the progress you've made on the recall.
Great.
You know the patients come.
Comments in that you had no new complaints is.
Is it basically resolved now in your mind.
And just to amplify a couple of things.
You indicated cordis is ramping production to replenish your inventories maybe you can give us some color about so when you you know.
How soon do you think your inventories will be replenished and last on that topic.
Was there an impact on.
In the fourth quarter again remind me, but has there been an impact on January February volumes.
From your lack of them from a lack of inventory I'm just not clear about this from us.
Thank you.
Sure Rick I'm happy to address them.
Those questions and thanks, and thanks very much.
So as it relates to the recall of course, nobody wants to have a recall.
But I'm proud of the fact that we responded very quickly.
And we were very proactive in that response and getting at the root cause.
And so as a result and in many cases, our relationships have actually strengthened as a result of our conservatism around patient care.
To get at the question of whether or not they recall itself impacted procedural volumes or for that matter of kind of how the fourth quarter ended I think we can empatic lease. They know there was there was no impact on procedural volumes are.
Our field team and our customers were able to continue to execute the cases that were on the schedule.
And we've been very swiftly, replacing the inventory at the hospital level as well as our own inventories Luckily as a company. We've we're pretty conservative about the on hand inventory we carry.
Which put us in a pretty good spot and so that's the inventory that we're working to replace swiftly with cordis and they've been a terrific partner not only in getting to resolution of the matter, but and really ramping production to bring us our our kind of stock levels back up to where we want them.
So in terms of whether or not the issue has been resolved I think it's fair to say, we have isolated the root cause and so what that means Rick is now we are in the process of.
Of the corrective actions component here, which is <unk>.
Highly documented.
Process of making sure the corrective actions are in place and that those corrective actions are effective and so we're in the process of doing all of that which I consider to be on track.
Hey, Joe.
Let me let me just quickly add on the financial aspects of your question per my prepared remarks, it's really.
Our balance sheet effect in terms of our liability to our customers to replace those products in a receivable.
On the cordis side as we as we.
Get them.
Place from from Cordis.
So there's no P&L impact either in Q4 or likely in Q1, and Erica point. The main focus is on serving servicing demand did not going on back order and so far so good. So it's really more a question of building up our safety stock.
Yeah. Thanks.
This story.
Sure.
And apologies for coming back to the.
Standard risk filing the good news is you won't have to say when youre going to do something but now we're moving on to phase two of how long is it going to take.
I know, it's impossible to know.
But I feel like I have to ask.
Maybe.
But on your outside consultants what are your outside consultant thing about.
The PMA supplements.
At the current time or are we thinking it could average.
Six months kind of process for 12 month kind of process can you give us.
Any incremental color just so that we could.
Roughly frame a reasonable expectation.
Yeah, Rick I think it's a it's a fair question, which is the PMA supplement kind of falls under the PMA General category, which is typically a six month review process.
That said, we have not baked in any assumptions around standard surgical risk lift.
In our guidance for the year, so the $102 million to $108 million.
Does not contemplate standard surgical risk.
Commercial activities this calendar year.
Okay.
And just last for me you called out the Jama study I wanted to ask you about that gosh.
Gosh, it reads fantastically well for T car.
And I realize it.
I mean, it's just part of a whole portfolio of studies and data that you have.
Is this debt.
For months.
Yeah.
Is that the.
Yeah.
The thing that flipped.
Adoption more aggressively or is that over.
Dreaming or.
Or hoping for.
Something from a specific study.
Thank you.
Sure, Rick and I'm glad that you caught that paper in Jama last week, and we felt it was significant enough obviously to put a press release around it it is very big news.
And in terms of the light switch phenomenon you know we've said this before that becoming the standard of care is a methodical and careful March.
Both our physicians and hospitals, we do see this as a unique.
Tailwind because it's really about overall outcomes, it's about a hospital efficiencies and better patient care and so I think it'll have a unique impact.
It's probably too soon to measure or to tell you exactly what that impact is although I.
I assure you our marketing and sales teams are armed and are having those conversations right now.
But I think it's safe to say that this business is probably not going to be a light switch phenomenon, it's moving physicians moving hospitals up the adoption curve methodically.
Thank you very much.
Hey, Rick I, just want to add some additional color to Eric as PMA comment I think.
At minimum of six month review cycle.
As you know these PMA can take significantly longer than that this is a novel strategy given that we did not do a prospective trial. So it's.
Fair to say.
It's hard to predict.
And I think I think as Erica mentioned that the guidance is a function of a lot of different.
Puts and takes.
Focused more around the engine of medicine.
Overall coming out of Covid, hopefully than any particular nuance around standard surgical risk, there's there's a lot of preparation regardless.
If and when its approved.
It's not a light switch type of thing, it's something that will.
I need to go to market with and talk to physicians about.
Thanks again.
Your next question comes from the line of Joanne Wuensch from Citibank.
Your line is now open.
Good afternoon, everybody and thank you for taking my questions.
I want to go to a previous question that sort of focus was on the first quarter, because I think the way when I look at the model you're sequentially improving throughout the year second half stronger than the first half, but it all gets sort of based on that first quarter.
Street consensus is around 24 million could you. Please give us sort of a range of thought on how we're starting the year.
Yes, I think.
We've we've discussed some of the monthly trends in Q4 and alluded to.
Q1.
And I think.
That debt argues for more conservatism.
Q1 overall in terms of.
Sequential.
Experience off of Q4.
And I think as we look towards the year, where we're really looking at kind of.
A three quarter.
With the second quarter being the past.
The beginning of normalization third quarter.
Typically has.
Some seasonality and we think that the vacation impact might be bigger this year, just given Kevin what's behind us as a society.
And then.
So growing from Q Q2 to Q4.
With with a fair amount of conservatism on on Q1, obviously, we still have March to go.
To see how it fully plays out.
Okay, just to push a little bit further it sounds like what you're saying given the trends first quarter below fourth quarter.
Try not to put words in your mouth, but I want to make sure. We set this up right.
I think that's.
On the conservative side of Conservative Joanne.
Okay Conservative product concerned if I got it.
Can you help us think about how you prepare for standard risk.
Is it different is it I mean different training different physician different salespeople help help us understand that.
Yeah, sure Joanne Hi, and thanks for joining us.
In terms of how we've been telling the story up till now its really been.
Working with our physicians to identify the high surgical risk criteria that qualify a patient for treatment.
If and when we obtain the standard surgical risk PMA approval it'll be the first time, where a therapy has been on a level playing field with carotid endarterectomy and so that's that inherently is going to change the way, we talk to our physician customers, whereas.
The focus will really be on <unk>.
<unk> not to do.
T car versus finding those high surgical risk patients in the high surgical risk criteria.
And so we will be working on additional marketing materials as additional training materials for our own team. Obviously, there are labels they get change that flow through the marketing materials.
And so those are all the things that we are doing in the background.
That's helpful and my last question is what other milestones you're in a position to share with us for ischemic stroke.
As you know Joanne we continue to be excited by the opportunity. It's a very fast growing market. As you know it is highly competitive as you also know and so as a result, we were.
Saving the details until such time that we really kind of have to talk about them.
But we're pleased with the progress that we're making and the progress is really on the clinical and regulatory fronts.
Within R&D at the moment.
Terrific. Thank you so much and have a great night. Thanks Joanne.
Your next question comes from the line of Danielle <unk> from SBB Leerink. Your line is now.
Thank you so much good afternoon, everyone. Thanks for taking the questions.
And just a follow up on Joanne question regarding standard Raskin, Erica you alluded to this but I guess once you do have standard rescue you're going to if it's kind of like the question might be why not T. Car is who can get a T car versus has to get P. A.
I'm curious about how you're thinking of the sort of halo effect on the total market that standard risk could bring.
Once you have it and how much of an accelerant that says even just in the existing high risk indication. That's the first part of the question I just have one follow up.
Yeah, I think you know overall Danielle it's it's.
It's certainly positive news.
And again this submission is really the first part of a journey towards standard surgical risk. So we don't want to get too far ahead of ourselves.
But I think we've said this all along Danielle which is vascular surgeons don't really divide up the world in high surgical risk and standard risk. That's a vernacular that is borne out of regulatory and reimbursement.
Policies and so what we find ourselves doing now is really having a conversation that is kind of not natural around high surgical risk and standard risk. So this will be for the first time, putting us on a level playing field, whether or not that has a halo effect for the overall market opportunity the.
Number of patients treated et cetera, I think it's too soon to tell so I don't want to get ahead of ourselves.
You think there's a tailwind in this jama paper that we just talked about.
Which is the presence of T car in an institution improves the outcomes overall and that coupled with our entry ultimately into standard surgical risk. These are the kinds of tailwind that will begin to move us towards the standard of care and potentially begin to expand the market.
Yeah, Yeah, that's okay that makes sense and that's helpful and I guess just to get my follow up I mean, you kind of answered it already I'll ask it anyway to see if there's any more color could equally in here, but is if you get a little bit more granular there and as we think about it.
Using the centers that are already doing T car for example, I mean, if they are already treating those patients are already trained on the device for me what would be the rationale and continuing to treat a patient that they are going to intervene with anyway with it with a carotid endarterectomy. Once you have once you have the standard risk indication I mean, it just seems like there is no no.
Rationale, but maybe I'm being overly overly bullish.
You know Danielle. This is the question that we ask ourselves every day right. What what is the continued rationale.
And you know it really comes down to inertia, we're up against a 70 year old procedure.
And physicians, who had been doing that procedure for multiple decades, many of them and we've talked about this inertia before by saying.
A mid career vascular surgeons done 405 hundred carotid endarterectomy.
I'm here to maybe 50 or 60 T cars, which is a lot, but you know.
It pales in comparison and so it's really about physicians in their own hands. The predictability of T car I think this jama paper furthers the evidence on the predictability of T car, it's baked in to that whole improving of the overall outcomes.
And so you know each and every month that goes by and every publication that is.
Presented in a peer reviewed journal.
Begins to chip away at that inertia.
Alright, thanks, so much.
Your next question comes from the line of <unk> Mehta from Piper Sandler Your line is now open.
Hi, good afternoon, and thanks for taking the questions I had just one quick question on the voluntary recall, Erica and Lucas and I know you acted out of an abundance of caution there and also did a thorough investigation and it it sounds like you've effectively fenced off the issue and that's behind you. So I guess I was hoping you could just help us better understand what the.
Cause was up at tip detachment issue and then I had a follow up for too. Thanks.
Yeah sure happy to talk about the root cause and thanks for joining us Adam.
As we talked about before the root cause was really human errors centered.
Moving to do with a particular part of the manufacturing process.
And you know we consider it very good news that a root cause could be identified often in these recall scenarios, you're looking for a kind of a needle in a haystack youre trying to find some commonality among the lots that have been recalled but thanks to the excellent work of our engineering team and our quality team.
We very quickly zeroed in on a particular human aspect of the process.
Okay. Thanks for the color there Erica and that's great to hear and for the follow ups I guess the next question is on <unk>.
The growth outlook for 2021, it feels like the focus has really started to shift more towards increasing utilization in the existing customer base versus training more and more physicians. So the question is qualitatively how should we think about the growth of the business.
In terms of the contribution from increased utilization with existing docs versus new Doc adds and I know you gave that 200, new dock number.
But what does that mix look like and then maybe you can level set us on those dynamics in past years in terms of their contributions to growth.
Yeah, Adam maybe I'll take that one and Erica can at any any color. We've always said that the training new physicians is kind of our investment.
In the future not not necessarily what's what's driving the business in the near term and going back to two.
2019, we trained.
Quite a bit more physicians than we had planned to so saar and by our bias has been.
Even throughout COVID-19 towards more and more focus on the trained physician base.
We're exiting 2020 with just 6% penetration overall and so there's just a lot of room to run by by applying that focus and the good news is this is already a concentrated group of docs and so and so we're now in a position to benefit from all.
Those prior year training activities.
And the fact that we've gotten a lot of lot of physicians now through their through their first cases in early part of their experience curve.
And.
As the data and the experience in individual hands a crew, that's where we can.
Constantly.
Kind of revisit and remind about all the benefits of T car against CA, which they still hold in high regard and so that's where we have been.
Bracingly applying the focus and that continues even more so.
'twenty 'twenty, one as well as.
Planning for hopefully positive news with FDA on the standard risk indication.
Thanks for the color there and then just one last one if I can sneak it in just.
On the P&L Opex in Q4 was a little bit above what we were modeling and I think that was due to the R&D step up.
It sounds like you expect continued growth in Opex from 'twenty, one so just trying to.
Dial that in a little bit better for our models. So just any quantitative or qualitative color you can give on opex spend in two.
2021, it would be great. Thanks, so much.
Yeah as I said in my prepared remarks, there were some timing related.
Effects in Q4 that being said.
If you annualize that number you can you can look at a run rate and not only are we continuing to invest.
Certain product and clinical and regulatory activities that we've got.
Some some some new ones. This year, we're also investing as we said in the commercial team.
Over the next two years to a slightly different mix.
And so all of those.
Investments should should incrementally take up.
Opex.
And the 21 quarters.
And can drive long term growth.
That's helpful. Thank you.
There are no questions from participants online I will turn the call back over to MS. Erica Rogers for the closing remarks.
Please go ahead. Thank you all very much for tuning in to the Silk Road earnings call and we hope you have a terrific 2021.
Ladies and gentlemen that does conclude today's conference call. Thank you for participating you may now disconnect.
Speakers from C&I line for your post conference call.
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